Majority And Dissenting Justice Disagreed On The Meaning Of A $500 Fee Cap Provision When Another Provision Discussed Additional Fees Being Within Play.
We know from 511 S. Park View, Inc. v. Tsantis, 240 Cal.App.4th 44, 48 (2015) [discussed in our October 10, 2015 post] that courts will honor a contractual “cap” of fees set forth in the language of the fees clause itself. The next case involves a residential lease with both a “capped” provision and another provision talking about additional fees being available in some situations. The interpretation of those provisions actually produced a split decision by the 2/5 DCA in Beloit & Associates, Inc. v. Michael, Case No. B286460 (2d Dist., Div. 5 June 21, 2019) (unpublished).
Plaintiff landlord and defendants/cross-complainant tenants got into a residential lease dispute, resulting in both a complaint and a cross-complaint (with the main dispute apparently centering on a security deposit). The lease had a primary fees clause with a $500 cap and another fees clause allowing additional fees to landlord if a dispute could not be worked out under certain specified situations. Ultimately, landlord accepted tenants’ CCP § 998 offer by which landlord obtained nothing under its complaint and tenants obtained $500 on the cross-complaint, with landlord apparently believing that there was a costs waiver based on pre-offer settlement exchanges even though there was no costs waiver in the 998 offer. Judgment was entered on the 998 offer, and tenants moved for Civil Code section 1717 fees under the fees provisions to the tune of a requested $31,797.50. The lower court awarded $28,000, provoking landlord’s appeal.
The majority, in an unpublished opinion authored by Justice Moor, affirmed. With respect to landlord’s waiver of cost argument, this was rejected because the lack of costs/fees language in the 998 offer allowed tenants to bring a subsequent fee motion. (Timed Out LLC v. 13359 Corp., 21 Cal.App.5th 933,944 (2018).) The pre-offer settlement exchange and subjective belief by landlords’ attorney were irrelevant. Landlord’s argument that no fees were allowable because there was a voluntary dismissal was plain wrong, because a judgment had been entered in tenants’ favor such that they prevailed. That brought the majority to landlord’s argument that only $500 could be awarded in fees, but the majority found that the other provision allowing additional fees superseded the cap and was applicable under section 1717 to tenants even though unilaterally worded in landlord’s favor.
Acting Presiding Justice Baker, in dissent, saw things differently on the “cap” issue. He believed that it was in play, because the additional fees provision had limiting language which invoked the cap—due to the language “Refer to Lease for limitations” in the second fees clause. He would have modified the fee award downward from $28,000 to $500. Here is his ending observation: “I cannot justify disregarding a glaring error in interpreting the lease documents, one that results in a mistaken award of tens of thousands of dollars in attorney fees, by an overly strict Marquess of Queensbury-type application of appellate brief formatting rules or abstract theorizing about possible concessions made below. I therefore respectfully dissent.”
BLOG PRACTICE POINTERS—Two practice pointers emerge based on the reasoning from both the majority and dissenting justices. First, if you want to waive fees and costs, make sure that waiver is clearly set forth in the section 998 offer; do not rely on pre-offer negotiations. Second, if you want to enforce a fee “cap” in a contract, make sure that the “cap” language is clear and unambiguous in nature, reiterated if there are other addendum provisions relating to fee recovery to avoid a result like the one in this decision.
BLOG HISTORY UNDERVIEW—This brings us to discuss John Douglas, the 9th Marquess of Queensberry, the person alluded to by Justice Baker in his dissent. This Marquess of Queensberry, who was supposedly a beautiful sports boxer himself, helped implement a strict code of conduct/rules for the sport of box (including the use of gloves and rules such as not hitting below the belt). But there is more. This M/Q got into a real battle with noted Irish poet and playwright Oscar Wilde. Based on an apparent homosexual relationship between Wilde and Q/M’s son Alfred, Q/M was angered by things and delivered a calling card “For Oscar Wilde, posing as Somdomite [sic]” at Wilde’s club. Wilde sued for criminal libel, which led to Q/M’s arrest. Wilde dropped his libel case because a defense to his claim was that Wilde had sex with other men (with Q/M indicating he intended to present such testimony in his defense). Q/M then won substantial defense expenses against Wilde based on a counterclaim. This left Wilde bankrupt, also resulting in his conviction for gross indecency and in two years of hard labor while Wilde was confined to jail. Wilde then went into exile in France. Q/M, at the age of 56, died on January 31, 1900. Months later, Wilde died at the Hotel d’Alsace in Paris, at the age of 46. Wilde’s last words right before his death were reputed to be something to the effect, “The wallpaper [in the hotel] is terrible—one of us will have to go!”